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A combine harvester outside John Deere's Harvester Works facility in East Moline, Illinois, U.S. on Nov. 7, 2019.

Daniel Acker/Reuters

Deere & Co. DE-N on Friday upgraded its fiscal 2021 earnings forecast after profit more than doubled in the first quarter on improved demand for farm and construction machines, sending its shares higher.

The Moline, Illinois-based company said higher farm commodity prices and rising exports, coupled with lower equipment inventories, have boosted the demand for farm machines.

Its early order program for sprayers, planters and combines all experienced double-digit growth. Orders for large tractors now extend into the fourth quarter.

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To keep up, the world’s largest farm equipment producer has ramped up production and added shifts at some of its facilities in the United States and South America.

“Ag fundamentals improved significantly throughout the first quarter,” Brent Norwood, investor communications manager, told analysts on an earnings call.

Deere’s shares, which have outperformed the broader market, gained about 12% in morning trade and were last up 10.5% at $331.90.

It expects industry sales of large agricultural equipment in the United States and Canada - the company’s biggest combined market - to grow by 15% to 20% this year.

Improved demand has strengthened Deere’s pricing power, which together with cost control measures enabled it to deliver the highest operating margin, or the profit Deere makes on equipment sales, in company history.

Its investment in technology offerings, aimed at reducing inputs costs and improving user productivity, has allowed it to charge higher prices for large farm machines.

Deere said it is grappling with high levels of absenteeism due to the coronavirus pandemic and with supply constraints for some electronic components. Surging steel prices and elevated freight rates, meanwhile, are projected to cost it $500 million in fiscal 2021.

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The company now expects 2021 net income in the range of $4.6 billion to $5.0 billion, higher than the $3.6 billion to $4.0 billion forecast earlier.

It reported a quarterly net income of $1.2 billion, or $3.87 per share - the highest profit in company history.

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